Rumor Has It: Apple Set to Go Toe-to-Toe With PayPal

Most recent Apple rumors are focused on upcoming new hardware, including new iPod touch and nano models with a built-in camera, and the mysterious tablet device, which has often been rumored, but seems to be gaining lots of steam this time around. Yesterday, another interesting rumor surfaced, but this latest speculation has nothing to do with hardware.

According to sources on Wall Street, as reported by Silicon Alley Insider, Apple is thinking about moving in on PayPal’s territory. According to the rumors, Apple is thinking about opening up iTunes Store accounts, allowing them to be used to make purchases on licensed third-party sites. If it does end up doing this, it really has to consider that iTunes name change, since it would then only cover an even smaller part of the service’s functionality.

It’s territory that Facebook is also looking to move into, with a planned “pay with Facebook initiative” that will allow third-party vendors to let visitors pay via Facebook Connect. If Apple follows suit and enters the fray, it could get very crowded for PayPal very quickly. As long as both Facebook and Apple can make its systems financially appealing to online retailers, it will bring with it a built-in legion of users, many of which could come from segments of the population who’ve traditionally been wary of PayPal.

The problem with this scenario is of course that it doesn’t funnel consumers towards an Apple hardware purchase, which is traditionally the purpose of its service and software offerings (MobileMe, or the App Store, for example). One possible scenario involves Apple leveraging the e-commerce potential of the iPhone by allowing users to pay for real-world items in-store using their mobile devices in combination with their iTunes account. If an iPhone could replace cards, wallet and cash, that would definitely become a selling point for many.